Right here’s How You Can Have Your Cake with AMD Inventory and Eat It Too – With Simply 6.6% Draw back Threat

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For thus a few years, Wall Avenue handled Superior Micro Units (AMD) because the little brother of Intel (INTC). Particularly, the kind of siblings that struggle on a regular basis. AMD was the challenger, and there have been many cases when Wall Avenue analysts puzzled if it might survive.

Skip forward a few a long time, and whereas INTC is now 10% owned by the U.S. authorities, AMD is a $400 billion inventory in its personal proper. That’s greater than double the worth of INTC. But quite a lot of that ascension got here in a really brief period of time.

A 235% cumulative acquire the previous 3 years will do this!

I wrote about AMD for Barchart on Aug. 6, 2025. The inventory had simply rocketed up in worth, then slipped after releasing earnings. I concluded from my chart evaluation that AMD had upside potential, however that an possibility collar may take the sting off. By decreasing threat.

How? By defining a worst-case situation up entrance. That’s what the put possibility buy facet of a protecting collar does. The coated name is the opposite a part of the commerce, which is positioned round a number of 100 shares of a inventory one owns.

A later article on Oct. 7 mapped out an possibility collar between $200 and $250, expiring this January. Right here’s a fast historical past of AMD’s inventory worth throughout that point, by Monday’s shut:

Aug. 6: $163

Oct. 11: $212

Nov. 17: $241

So, what now? AMD reported earnings earlier this month, in order that’s out of the best way. However the tech sector is underneath quite a lot of stress. And at 15x gross sales and greater than 80x trailing earnings, AMD has the makings of a type of “I advised you so” tales. It’s now susceptible to any unhealthy information, whether or not it’s company-driven, sector-related, or a market-wide problem.

We don’t see too many shares this massive which have a 52-week worth vary from $76 to $267. In order a threat supervisor, my thought is, as at all times, to attempt to have my cake and eat it too.

A collar is simply as viable because it was the final two instances I wrote about AMD. And with the inventory’s current gyrations driving up its volatility, the choices pricing is extra favorable.

As we see within the image beneath, I can exit simply three months to subsequent February, and have certainty that I can’t lose greater than 6.6% on a inventory that has been a prime performer already.

That’s as a result of the mix above pairs a $240 strike put possibility with a $300 name. So to ensure that me to have a call about whether or not to threat being referred to as at that greater stage, the inventory must rise not solely again to its all-time excessive, however practically 10% above it.

The strike worth of the put is correct at the place it closed Monday, so the draw back is basically simply my price, as depicted above. An 18% upside and fewer than 7% draw back over simply 3 months? Not unhealthy in any respect.

AMD’s inventory seems to be susceptible right here, though it has staved off a few of the market’s current tech decline. And since proudly owning 100 shares of AMD shouldn’t be in everybody’s price range, for many who decide they’d prefer to attempt to revenue from a drop in AMD’s inventory worth, there may be this.

The Direxion Day by day AMD Bear -1X Shares (AMDD) basically shorts AMD every day. It has the identical math as different inverse ETFs, which implies holding it by prolonged rises within the inventory (which implies AMDD is falling in worth) is one thing to pay attention to earlier than contemplating it.

Nonetheless, if there was ever a time for merchants and traders to go searching and scout for methods to earn a living on inventory worth drops as an alternative of the positive factors we’ve been conditioned to anticipate, it’s now. So whether or not it’s a collar, a put possibility, extra cash, smaller place sizes, or inverse ETFs, I strongly encourage you to get extra aware of the way to mix protection with the same old offensive sport plan each investor is educated to have.

Rob Isbitts, founding father of Sungarden Funding Publishing, is a semi-retired chief funding officer, whose present analysis is discovered right here at Barchart, in addition to at his ETF Your self subscription service on Substack.

On the date of publication, Rob Isbitts didn’t have (both immediately or not directly) positions in any of the securities talked about on this article. All info and knowledge on this article is solely for informational functions. This text was initially printed on Barchart.com

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